ABB Ltd. (ABB), a Swiss-based global technology company listed on the New York Stock Exchange with core businesses focused on electrification, automation, motion and robotics, has agreed to pay more than $315 million to resolve an investigation into the violations. The Foreign Corrupt Practices Act (FCPA) stems from the bribery of a high-ranking official at a South African state-owned energy company.
The Justice Department’s resolution was coordinated with the US Securities and Exchange Commission (SEC), along with prosecutorial authorities in South Africa and Switzerland.
“This is the Department’s first coordinated resolution with authorities in South Africa, where ABB’s criminal scheme was conducted, reflecting our commitment to relationship-building and our continued partnership in the global fight against corruption,” said Assistant Attorney General Kenneth. A. Polite, Jr. of the Justice Department’s Criminal Division. “ABB bribed a high-ranking official at a South African state-owned energy company to corruptly obtain confidential information and win lucrative contracts. In addition, our partners in South Africa have brought corruption charges against that official. This resolution demonstrates the Criminal Division’s thoughtful approach to appropriately balancing ABB’s extensive compensation, timely and full cooperation, and the Department’s intent to bring ABB’s historical misconduct to the Department’s attention as soon as it is discovered.
According to court documents and statements made in court, ABB entered into a three-year deferred prosecution agreement (DPA) with the department in connection with the filing of a criminal information in the Eastern District of Virginia, charging the company with conspiracy to violate the FCPA. Anti-Bribery Provisions, Conspiracy to Violate the Books and Records Provisions of the FCPA, and Material Violations of the FCPA. In addition, ABB subsidiaries such as ABB Management Services Ltd. (Switzerland) and ABB South Africa (Pty) Ltd. (South Africa) pleaded guilty to one count of conspiracy to violate the anti-bribery provisions of the FCPA.
The Department reached this determination with ABB based on several factors, including: 1) the nature and seriousness of the misconduct; 2) ABB demonstrated intent to promptly disclose the misconduct to the Department; 3) ABB’s exceptional cooperation with the Department’s investigation; 4) ABB’s extensive remediation, including undertaking a root-cause analysis of misconduct and making significant investments in compliance staff, compliance testing and monitoring through the organization; 5) ABB’s commitment to further enhance its compliance program and internal controls, enhanced reporting provisions requiring ABB, during the pendency of the DPA, to meet with the Department at least quarterly and submit annual reports on the status of its remedial efforts, the results of its testing of its compliance program, and its compliance program as reasonably to ensure that its proposals are designed, implemented and enforced so that it is effective in preventing and detecting violations of the FCPA and other applicable anti-corruption laws; 6) ABB’s decade-old criminal history, which includes two prior criminal convictions of ABB entities with the Department for FCPA violations in 2004 and 2010, as well as an ABB entity’s guilty plea to bid rigging in 2001; 7) ABB’s agreement to simultaneously resolve separate investigations by authorities in South Africa and Switzerland and the SEC and the expected resolution of a related investigation by German authorities; and 8) ABB’s agreement to continue to cooperate with the Department in ongoing investigations. In light of these considerations, the criminal monetary penalty reflects a 25% discount from the mid-point, otherwise between the middle and high end of the applicable US Sentencing Guidelines penalty range.
Pursuant to the DPA, ABB’s total criminal penalty is $315 million. The department has agreed to credit half of the criminal penalty against the amount paid by the company to South African authorities in related proceedings, along with other credits for amounts paid by ABB to settle investigations by the SEC and authorities in Switzerland and Germany. , the payments underlying the expected resolution with the German authorities will be made within 12 months of today’s date.
“Corruption and bribery are not victims. They can create dangerous working conditions, hurt honest businesses, and destroy trust and integrity in local and global governance,” said Jessica D., U.S. Attorney for the Eastern District of Virginia. “This resolution reflects the need for accountability, restitution and rehabilitation in the wake of these types of violations. I express my appreciation to the law enforcement authorities of South Africa, Switzerland and Germany for their valuable assistance.
“As this resolution shows, international partnerships are central to the FBI’s efforts against global corruption,” said Luis Quesada, Assistant Director of the FBI’s Criminal Investigative Division. “The FBI and our law enforcement partners conducted a thorough investigation to uncover the source of the bribe to a senior official of a South African state-owned energy company. The FBI is determined to pursue violators of the Foreign Corrupt Practices Act, regardless of the country in which the crime is committed.
According to ABB’s filings and court documents, between 2014 and 2017, ABB, through some of its subsidiaries, paid bribes to a South African government official who was a high-ranking employee at state-owned and controlled energy company Eskom Holdings Limited (Eskom) to obtain business benefits in connection with the award of multiple contracts. ABB engaged multiple subcontractors related to South African government officials and made payments to those subcontractors, at least in part in the form of bribes. ABB worked with these subcontractors despite their poor qualifications and lack of experience. In return, ABB received unfair advantages in its efforts to obtain work with Eskom, including, among other benefits, confidential and internal Eskom information.
As part of the scheme, ABB conducted sham negotiations with a South African government official to obtain contracts at inflated prices pre-arranged by ABB, on the condition that ABB hire a specific subcontractor associated with that official. ABB falsely recorded payments to subcontractors as legitimate business expenses when, in fact, a portion of the payments were intended as bribes to a South African government official.
The FBI’s International Corruption Unit and the United States Postal Inspection Service (USPIS) are investigating the case. The Department of Justice’s Office of International Affairs provided valuable assistance. The Department expresses its appreciation for the assistance provided by law enforcement authorities in South Africa, Switzerland and Germany.
Trial attorney William E. Schurman and Assistant Deputy Chief of the Criminal Division’s Fraud Division Jonathan P. Robel and Assistant US Attorney for the Eastern District of Virginia Heidi B. Gesh is prosecuting the case.
The Fraud Division is responsible for the investigation and prosecution of FCPA matters. More information about the Department of Justice’s FCPA enforcement efforts can be found at www.justice.gov/criminal/fraud/fcpa.